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Issues Involved: Appeal against deletion of penalty amount u/s 271(1)(c) of the IT Act, 1961 based on the AO's order dated 31.01.2008 giving effect to the ITAT's order, presently under consideration in proceedings u/s 263 of the IT Act, 1961.
The appeal was filed by the revenue against the order of the CIT (A) - XIX dated 31.12.2003 for the assessment year 1998-99. The only effective ground raised was regarding the deletion of the penalty amount of Rs 36,76,918/- by the CIT (A) based on the AO's order dated 31.01.2008 giving effect to the ITAT's order, which was under consideration in proceedings u/s 263 of the IT Act, 1961. The assessee, engaged in investment and Quality Management activity of Piramal Group companies, claimed Rs 1,39,33,952/- as interest on a loan from M/s Morarjee Mills Ltd used for purchasing shares of M/s Struth International Ltd (Mauritius). The claim was disallowed by the Assessing Officer, leading to penalty proceedings u/s 271(1)(c) of the Act. During the hearing, the assessee's Counsel pointed out that the Assessing Officer, while implementing the ITAT's order, allowed the interest claim in favor of the assessee. The CIT (A) deleted the penalty citing the Assessing Officer's allowance of the claim in the order dated 31.01.2008. After considering arguments from both sides and reviewing the records, it was noted that the very basis for imposing the penalty was accepted by the Assessing Officer while implementing the ITAT order. Therefore, the imposition of the penalty was deemed unsustainable. The order of the CIT (A) was found to be without any flaw, and the revenue's ground was dismissed. Consequently, the appeal of the revenue was also dismissed. The judgment was pronounced in the Open Court on the 4th day of December 2009.
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